Key Income Statement Ratios

Turnover ratio inventory turnover and days sales in.

Key income statement ratios. We then look at leverage and liquidity ratios taken from the balance. Ratio 6 gross margin gross profit percentage ratio 7 profit margin ratio 8. In other words these ratios reflect how well a company can convert its resources and assets into income. Income statement cash flow statement financial ratios overview 6 basic financial ratios 5 must have.

1 return on assets roa. These ratios are derived from income statements. Financial ratios using income statement amounts in this section we discuss the following financial ratios which involve amounts reported on a company s income statement. Items on these statements are compared with other items to produce ratios that represent key aspects of the company s financial picture such as liquidity profitability use of debt and earnings strength.

Liquidity ratios are financial ratios that measure a company s ability to repay both short and long term obligations. Income statement formulas calculations and financial ratios below is a list of concepts related to an income statement along with the equations you ll need to calculate the metrics yourself. Key ratios take data from the subject company s financial statements such as the balance sheet income statement and statement of cash flows and then compare them with other items. Some of the most common ratios include gross margin profit margin operating margin and earnings per share.

In this session we went over some of the key ratios that a purchasing manager would want to look at and understand. As investopedia defines them key ratios take data from the subject company s financial statements such as the balance sheet income statement and statement of cash flows. Profitability ratios measure a company s ability to generate earnings profit in relation to their revenue operating costs shareholders equity and balance sheet assets. Common liquidity ratios include the following.

The current ratio current ratio formula the current ratio formula is current assets current liabilities. Gross margin gross profit revenue research and development r d to sales r d expense revenue.